Question

The following table lists the assets and debts for the Smith family. Calculate their net worth. \begin{tabular}{l|l} Assets & Debts \\ \hline Savings \(=\$ 1498\) & Credit card balance \(=\$ 1841\) \\ \hline Checking \(=\$ 2148\) & Mortgage \(=\$ 74,614\) \\ \hline Furniture \(=\$ 18,901\) & Automobile \(=\$ 5488\) \\ \hline Jewelry \(=\$ 3845\) & \\ \hline \end{tabular}

Short answer

Answer: To find the net worth of the Smith family, first calculate the total value of assets and the total value of debts. Then, subtract the total debts from the total assets.

Step-by-step solution

Add up the assets

First, we need to find the sum of the assets listed in the table. Add the values for Savings, Checking, Furniture, and Jewelry.

Add up the debts

Next, add up the debts listed in the table. Add the values for Credit card balance, Mortgage, and Automobile.

Calculate the net worth

Subtract the total debts found in step 2 from the total assets found in step 1. This will give us the net worth of the Smith family.

Key concepts

Understanding Assets and Debts

In personal finance, assets and debts are key elements in calculating net worth. Assets are anything of value that an individual or family owns, which can generate cash flow or be sold for money. Common examples include:

• Cash and savings accounts
• Property such as a home or land
• Investments like stocks and bonds
• Valuable goods such as jewelry and furniture

Debts, on the other hand, are the obligations or liabilities a person owes. These are financial responsibilities that need to be paid back and include items such as:

• Credit card balances
• Mortgages on properties
• Automobile loans
• Personal loans

Understanding these concepts is essential for managing your finances, as debts reduce the amount of wealth you possess, while assets contribute to accumulating it. To gain a clearer picture of financial standing, tracking both assets and debts regularly is important.

The Art of Personal Finance

Personal finance refers to managing your own money, including budgeting, saving, investing, and planning for the future. It involves:

• Organizing your finances through budgeting
• Monitoring spending and saving habits
• Investing in various financial vehicles for growth
• Planning for retirement and unexpected expenses

Actively managing your personal finances gives you control over your financial future. It allows you to make informed decisions on spending and saving, leading to greater financial security. Being aware of your financial situation helps you plan effectively, ensuring that your assets outweigh your debts. Over time, efficient personal finance practices can significantly enhance your financial well-being.

Basic Arithmetic Operations in Financial Calculations

Basic arithmetic operations such as addition and subtraction are fundamental in calculating net worth. Calculating net worth requires the use of these simple yet powerful arithmetic skills.

Adding Assets

When determining net worth, begin by adding up all types of assets:

• Start by listing down all assets (e.g., Savings: \(1498, Checking: \)2148, Furniture: \(18,901, Jewelry: \)3845)
• Add the values to get the total assets using:\[\text{Total Assets} = \text{Savings} + \text{Checking} + \text{Furniture} + \text{Jewelry}\]

Summing Debts

Next, add all debts together:

• List all debts (e.g., Credit card: \(1841, Mortgage: \)74,614, Automobile loan: $5488)
• Sum them up to find the total debts using:\[\text{Total Debts} = \text{Credit Card} + \text{Mortgage} + \text{Automobile Loan}\]

Finding Net Worth

Finally, subtract total debts from total assets to get net worth:\[\text{Net Worth} = \text{Total Assets} - \text{Total Debts}\]Understanding these basic arithmetic methods allows people to calculate their net worth, offering a glimpse into their financial health and future prospects.